Itās marvelous to generate passive income to complement your active income. Itās like hiring someone to work for you, except you only pay him once.
Simply buy quality dividend stocks when theyāre priced at good valuations and then hold them forever. So, you only have to pay that commission fee once and earn passive income for life.
Right now, Bank of Nova Scotia (TSX: BNS)(NYSE: BNS) is compelling after correcting about 15% from the 2017 $80 level.
Why Scotiabank is quality
Scotiabank is a quality dividend stock. It has paid dividends every single year since its foundation in 1832 and has paid an increasing dividend in 43 of the last 45 years.
The big Canadian bank stock is currently good for a 4.93% yield. This is very attractive — a boost of about 78% in income — compared to the Canadian stock marketās yield of roughly 2.8%.
Additionally, Scotiabankās earnings steadily grow on a per-share basis over the long term. Its stock price largely follows the path of its earnings growth except for occasional corrections that make the stock a bargain, as it has experienced now.
The yield and valuation that it offers today are some of the best yields and valuations that the bank has ever offered!
BNS Dividend Yield (TTM) data by YCharts. BNSās yield history.
BNS Price to Book Value data by YCharts. BNSās valuation history.
Why the bankās dividend is safe
You want to get passive income from safe dividends, so you donāt get those nasty dividend cuts that are way too common in the stock markets.
Hereās why Scotiabankās dividend is safe. Its core business, its Canadian operations, pretty much covers for its dividend. As well, it also generates earnings internationally, with a focus on higher-growth emerging markets in the Pacific Alliance countries, where thereās severe underbanking. The bankās actual payout ratio is less than 50%, making its juicy dividend secure.
How to make $1,000 of passive income a month
To get $1,000 per month from Scotiabank, invest about $243,408 at the stock price of $70.52 per share as of writing. However, if thatās all youāre investing in your portfolio, thatās too much concentration in one stock.
You donāt want to put all your eggs in one basket. You shouldnāt just stop at having one dividend stock to generate your passive income. Instead, you can divide that +$243,000 into 10-15 quality dividend stocks.
That way, you wouldnāt be paying too much in commission fees, but youāll have your hard-earned capital well invested. Make sure your chosen stocks are diversified across different sectors. Utilities, banks, REITs, energy infrastructure companies, and telecoms are common places to invest for secure passive income.
